Briefings for top congressional Democrats were to start either over the weekend or today (Monday), a senior transition-team official told The Associated Press late last week. President-elect Obama is slated to meet today with House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., in a Democratic strategy session that is likely to focus on the economic recovery package.

It’s time to look forward, not back. The 111th Congress meets tomorrow (Tuesday), and a comprehensive economic stimulus package is at the top of its agenda.  Hopefully, the lawmakers can put partisan bickering aside (fat chance) and have a bill in place for President-elect Barack Obama’s signature soon after his Jan. 20th inauguration.

Experts are looking for a stimulus package of $800 billion to $1 trillion (“pork-barrel” projects included), although the Obama administration officials claim they will trim away any unnecessary fat.

Don’t expect much joy from retail-land as a trade group projected that December sales plunged by more than 1% with J.C. Penney Co. Inc. (JCP) (-11%), Kohl’s Corp. (KSS) (-10%), and Target Corp. (TGT) (-8%) among the primary victims.  As Money Morning predicted in a recent “Buy, Sell or Hold” column, discounter Wal-Mart Stores Inc. (WMT) is believed to have benefited most from the economic weakness with sales projected to have risen by 3% in December. While the holiday numbers seem dire at best, gift card sales don’t show up in the data until they are redeemed so retailers have one last opportunity for positive news in January (and beyond).

Unemployment data highlights this week’s news reports and a 12th straight month of labor contraction is a foregone conclusion.

As for stocks, the so-called “January Effect” states “as the first five days of January go, so goes the market for the year.” Let’s hope the full week sets a nice tone for 2009 (not a bad start).  The first trading session of the New Year on Friday got things off to a fine start. The Dow Jones Industrial Average soared 258.30 points, or 2.9%, pushing the 30-stock blue-chip index back up over 9,000 to its highest close in two months. The Dow ended trading on Friday at 9,034.69.

Many investors closed their books on 2008 a few weeks early, but took some opportunities to rebalance their portfolios for 2009.  The Dow experienced its worst year since 1931 and the Nasdaq and S&P 500 indexes have fallen almost 45% since their 2007 highs. Foreign markets suffered similar fates, for instance, with Japan’s Nikkei having plunged 42% last year.

On Friday, trading was thin and the economic backdrop was dour, but it still felt “good to get off to a good start on the first trading day of the year,” Fred Dickson, chief market strategist at the investment firm D.A. Davidson & Co. told The Washington Post. “Even though all the economic data is discouraging, I think there’s a psychological lift to starting off the year on solid footing.”

Investors actually shrugged off a report from the Institute for Supply Management that showed that manufacturing activity contracted to a 28-year low in December. All but one of the stocks in the Dow posted gains – JP Morgan Chase & Co. (JPM) being the only loser. General Motors Corp. (GM), Alcoa Inc. (AA), The Boeing Co. (BA) and Citigroup Inc. (C) posted the biggest increases in the Dow.

Citigroup shares rose 6.4% to close at $7.14 after the bank revealed it would not be paying bonuses to its top executives [For more details on the Citi announcement, check out this related story in today’s issue of Money Morning]. Financial stocks also got a boost from a report that the U.S. Treasury Department said it would consider insuring toxic assets at large firms from unlimited future losses, just as it did for Citigroup in November.

General Motors shares soared 14% to close at $3.65 a share on Friday after financing company GMAC LLC said that as part of its $6 billion federal bailout and decision to become a bank, it will no longer have the exclusive right to provide low-interest loans to borrowers who buy General Motors cars and trucks. The change may help GM sell more vehicles, and rely less on GMAC’s ability to provide credit. GM sales fell 41% in November after GMAC had significantly tightened credit the prior month, leaving many prospective buyers unable to borrow.

The Standard & Poor’s 500 Index advanced 3.2%, or 28.55 points, to close at 931.80, while the technology-heavy Nasdaq Composite Index climbed 3.5%, or 55.18 points, to close at 1,632.21.

The Dow has now risen for three consecutive trading sessions. But the market still has a long way to go to recover from a year that handed the Dow a 34% decline, its biggest drop since 1931, and left the S&P down 38% for its worst performance since 1937. The Nasdaq was down more than 41% for the year.

“We still think the market bottomed on Nov. 20, and 2009 will show a continuation of the 25% rally we’ve seen the past six weeks,” Phil Orlando, chief equity strategist with Federated Investors, told The Post. “The economy will start to improve by mid-2009, and stocks are starting to discount that now.”

Market Matters

Though the year-end fanfare and fireworks were lackluster at best, investors put a disastrous 2008 in the rearview mirror and looked forward to better times ahead (or more of the same). While many had hoped for a last minute Santa Claus rally, the fat man did make an appearance over the last two weeks of the year, though results were modest and contributed little to overall holiday cheer.

Amid light volume, investors seemed content to take some time off to lick their collective wounds, analyze what went right (a very short list, indeed!) and wrong (much too long a list to reproduce here), and set their sights on 2009 (or update their résumés).  As has become the norm, the news headlines were dominated by the usual suspects: The bailout deals (financial and auto), the Bernard Madoff scandal, retail, and energy prices.

While much of the financial crisis has involved residential loans, Foresight Analytics predicts that commercial mortgages will become the next ax to fall as property developers take their place in line for the next federal bailout.  The continued freeze in credit and a vast recession could set the tone for an array of hotels, shopping centers, and office complexes to move toward default.

The afore-mentioned GMAC represented the latest non-bank to become a bank as the U.S. Federal Reserve approved its charter and the U.S. Treasury Department opened its Troubled Asset Relief Program (TARP) pocketbook to the tune of $5 billion (and another $1 billion for parent GM).  Soon after, the financing company (rather bank) announced plans to offer 0% loans for certain GM models in an attempt to jumpstart the auto sector  (Now, that’s what TARP was designed to do).

A Credit Suisse Group AG (ADR: CS) analyst quickly put a damper on these “positive” developments by downgrading GM to an “Underperform,” and claimed the company could still fall into bankruptcy.  Bernard Madoff turned over a list of his personal assets to the U.S. Securities and Exchange Commission as the befuddled agency attempted to track down that missing $50 billion.  Meanwhile, those “lucky” Madoff investors who managed to take distributions may be forced to give that money back as lawsuits apply a six-year “claw back” provision on past redemptions.

While Amazon.com Inc. (AMZN) reveled in the unexpected delight of its best holiday season ever, MasterCard Inc. (MA) predicted that most retailers were not so fortunate.  Its SpendingPulse unit projected that total holiday sales declined by 2.5% to 4% from last year’s levels and the International Council of Shopping Centers (ICSC) predicted more store closings in 2009.

Turmoil in the Middle East and a dispute between Russia and Ukraine served to advance the energy markets as oil prices jumped above $46 a barrel on the first trading day of the New Year.  For the most part, traders (and speculators) continued to take their cues from the weak global economy (and sluggish demand) as oil prices have fallen more than $100 a barrel since mid-July.

Economically Speaking

The economic data of the past two weeks did little to instill confidence that the U.S. recession will be short-lived or to promote an expectation that a rebound is imminent.  The manufacturing sector remained weak as durable goods orders fell for the fourth straight month and the ISM purchasing managers’ survey revealed widespread pessimism as it hit its lowest reading in 28 years.

Consumer confidence dropped to an all-time low, as individuals remained worried about their jobs and were hesitant to spend on much beyond the bare essentials (bad news for retailers).  Third-quarter gross domestic product (GDP) was again reported as down 0.5%, and most analysts expect a far worse showing for the fourth quarter.

On the housing front, both existing and new home sales continued to decline in November and median prices tumbled on a national level.  The drop in mortgage rates, however, prompted a surge in refinancing activity and borrowers may soon have a few extra bucks in their pockets to contribute to the economy.

On that note, all hope is not lost. As the government continues to pour money into the mortgage markets, the most optimistic of analysts believe that the same housing sector that started the downturn eventually will lead the economy out of its doldrums.  Home prices are affordable; mortgage rates are extremely low; and the incentives are there for those who can take advantage, meaning there’s perhaps a slightly brighter light at the end of the tunnel.

Weekly Economic Calendar

Source: Obama Stimulus and January Effect Will be the Week’s Top Stories

Citi’s shares have plunged 50% this week – including 26.4% yesterday, when they dropped $1.69 each to close at $4.71. It’s the first time since 1994 that the shares closed below $5.

Citigroup, once the biggest U.S. bank with a stock-market value of $274 billion at the end of 2006, dropped yesterday to about $26 billion, slipping to the last spot after Minneapolis-based U.S. Bancorp (USB) in a list of the Top 5 U.S. banks as measured by market value. Neither a plan by Chief Executive Officer Vikram S. Pandit announced this week to cut costs by shedding 52,000 jobs, nor an endorsement by billionaire Saudi investor Prince Alwaleed bin Talal, a longtime Citigroup investor, seemed to allay investor fears that the bank could stop the year-long run of losses that now totals $20 billion.

“Investors right now aren’t convinced that we’re done seeing dead bodies on the Citigroup balance sheet,” William Fitzpatrick, an equity analyst at Optique Capital Management Inc. in Milwaukee, told Bloomberg News. “That’s what the sell-off is, concern over more and more losses over the next couple of quarters.”
Citigroup spokeswoman Christina Pretto declined to comment on the board meeting. She reiterated a statement made by the New York-based company earlier this week that it has “a very strong capital and liquidity position and a unique global franchise.” Citigroup shares were up 88 cents at $5.59 in German trading today, Bloomberg reported.

Including the $25 billion infused as part of the U.S. Treasury Department under the $700 billion Troubled Asset Relief Program (TARP), the company has at least $50 billion of capital in excess of the amount required by regulators to qualify as “well capitalized.” Capital is the cushion banks must keep on hand to absorb losses and protect depositors.

Bank stocks all took hits on concerns a global recession may deepen. JPMorgan Chase & Co. (JPM), the biggest U.S. bank, fell 18% to $23.38, while No. 2 Bank of America Corp. (BAC) declined 14% to $11.25 and Wells Fargo & Co. (WFC) fell 7.7% to $22.53. U.S. Bancorp fell 6.4% to $22.12, Bloomberg said.

After yesterday’s market close, Ladenburg Thalmann Financial Services (LTS) analyst Richard X. Bove of sent out a research note reiterating his “Buy” rating for Citi, arguing that the bank has positive net free cash flows, a strong capital base, and a diversified business base. In the end, Bove says, “cash flows are all that matter,” and that it would “take a Depression every bit as large and long as the 1930s debacle to shake this company’s viability … I would be a buyer of this stock.”

Bove is considered one of the top banking analysts, and has consistently made  the correct calls about the crisis. It remains to be seen if he’ll be right this time.

Citi this week agreed to buy back $17.4 billion of assets remaining in a series of funds known as structured investment vehicles, or SIVs, after it previously agreed to guarantee the liabilities in those funds.

In a separate story Wednesday, Wall Street banking analyst David Trone said that he expects higher credit costs and additional losses to force Citi to take $3 billion in write-downs in the year’s final quarter, a realization that prompted him to boost his quarterly loss estimate for the company and cut his target price for the stock.

“The key question is whether management will be able to continue to find buyers for business units, which is necessary to fortify the capital base against further credit losses and write-downs,” Trone, an analyst with Fox-Pitt Kelton Cochrane Caronia Waller, wrote in a research note to clients.

Fox-Pitt boosted its quarterly loss estimate for Citigroup from its prior projection of only 8 cents a share all the way to 79 cents a share. The brokerage then cut its profit estimate for 2009 from its earlier estimate of 69 cents per share all the way down to 28 cents, Reuters reported.

Trone, who rates Citi shares as performing “In Line” with the general market, cut his target price on the shares from $20 to $16. From Tuesday’s closing price of $8.36 a share, even that lower target price would represent a return of 91%.

Worries about Citigroup’s problem assets will continue to weigh down investor confidence, Trone wrote. Thus, while Citi is definitely a “cheap” stock by one key measure, it isn’t necessarily a bargain.

“Citi trades below tangible book, although we believe this is at risk given still-large problem asset exposures,” Trone wrote.

Citi said it’s moving the structured investment vehicle assets into a portfolio of assets held for sale. The transfer allows the SIV funds to fully repay maturing debt obligations. It will be accounted for as a “cashless” transaction, since the funds were essentially already on Citi’s balance sheet. In fact, the assets will be labeled as being “available for sale” basis, meaning changes in their value will affect the company’s balance sheet equity – but not its earnings, Reuters reported.

Back in December, Citigroup agreed to support the SIVs, which at the time held roughly $49 billion of assets. At one point, the bank’s SIVs were actually “off-balance-sheet” entities, holding roughly $100 billion in assets.

A SIV is a fund that borrows money by issuing short-term securities at a low interest rate and then lends that money by purchasing long-term securities at higher rates of interest. If managed correctly, fund investors can make a profit from the difference.

SIVs proliferated, and were in widespread use by investment banks and other financial institutions. But they ran aground when the credit crisis caused the demand for short-term bonds and commercial paper to evaporate. SIVs saw the value of their holding plummet, forcing institutions such as Citi – which had been operating the funds as off-balance-sheet funds – to prop them up with financial support.

This is the latest move Citigroup – one of the hardest-hit by the worldwide financial crisis – has been forced to make as it struggles to get back into the black. Citi has notched losses in each of the past four quarters, including a $2.8 billion loss in the third quarter, and has taken in excess of $40 billion in write-downs.

On Monday, Citi unveiled plans to cut more than 50,000 jobs in the “near term” and slash expenses by 20% to preserve capital as it faces a global slowdown that’s expected to push well into 2009. The cuts are on top of the 23,000 jobs eliminated so far this year and are part of CEO Pandit’s plans to whittle the bank’s work force down to 300,000. By the time Pandit puts down the corporate-cost-cutting machete, he’ll have lopped off about 20% of the company’s work force.

At its peak at the end of 2007, Citigroup had a work force of 375,000.

Just last week, as Money Morning reported, Citigroup announced the release of 10,000 employees, and said it was boosting interest rates an average of 3% for about one-in-five of its credit card holders.

Source: Citigroup Board to Meet Today to Weigh Options for Embattled U.S. Banking Giant

• Google Inc. (GOOG) said yesterday (Thursday) that profit climbed 26% to $1.35 billion, or $4.24 per share in the third quarter, up from $1.07 billion, or $3.38 per share, at the same time last year. Revenue soared 31% to $5.54 billion.

• Initial claims for unemployment insurance last week fell 16,000 to a seasonally adjusted level of 461,000 the Labor Department reported yesterday (Thursday). However, the four-week average, which is less volatile, increased slightly to 483,250 – a seven-year high. The number of people continuing to receive jobless benefits rose 40,000 to 3.7 million.

• Peabody Energy Corp. (BTU), the St. Louis-based company that fuels about one-tenth of all U.S. electricity generation and more than 2% worldwide reported net income of $369 million, or $1.36 cents per share, in the third quarter. That compares with $32.3 million, or 12 cents per share, a year ago.

• Nucor Corp.’s (NUE) third-quarter profit nearly doubled, the Charlotte, N.C.-based steelmaker said yesterday (Thursday). The company reported profit of $734.6 million, or $2.31 per share, compared to $381.2 million, or $1.29 per share, in 2007. Quarterly sales jumped 75 percent to a record $7.45 billion.

• Nokia Corp. (ADR: NOK) announced yesterday (Thursday) that third quarter net profit dropped to $2.7 billion (1.09 billion euros) from 1.56 billion euros a year earlier. Net sales for the Finland-based cell phone maker declined 5% to $16.6 billion (12.2 billion euros) from 12.9 billion euros, BusinessWeek reported.

• Advanced Micro Devices Inc. (AMD) yesterday (Thursday) announced a third quarter loss of $67 million, or 11 cents per share. For the same period the year prior, the memory-chip maker lost $396 million, or 71 cents per share, MarketWatch reported.

• The Hershey Co. (HSY) yesterday (Thursday) announced that its third quarter profit was $124.5 million, or 54 cents per share, up from $62.8 million, or 28 cents per share, in the third quarter of 2007. The domestic candy maker’s revenue increased 6.4% to $1.49 billion due to 25% price increases to help offset higher raw ingredient costs, The Wall Street Journal reported.

• Citigroup Inc. (C) yesterday (Thursday) announced a $2.8 billion loss for the third quarter. North American credit-card loan charge offs increased by $311 million in the quarter, reflecting slower payment rates, higher bankruptcies, rising unemployment and lower recoveries on bad debt, Citigroup Chief Financial Officer Crittenden said on a conference call, Bloomberg News reported. Citi shares lost 33 cents each, or 2.03%, to close at $15.90.

Source: Global Investing Roundups Friday, October 17th, 2008

The fact that the proposal had the enthusiastic support of George Bush, Hank Paulson, Ben Bernanke, John McCain, Barack Obama and Nancy Pelosi is sufficient reason to question it, right there.

The hubbub over the bailout vote may have pushed the day’s grim economic news to the back burner, but it should be noted that the Labor Department reported that non-farm payrolls declined by 159,000 jobs in September.

That was way higher than the 110,000 loss expected by economists, and the worst showing since March 2003. It also marked the ninth consecutive month of negative job creation. 760,000 jobs have officially been lost this year, although the true number is likely higher because of the BLS’s “birth/death adjustment.”

While the unemployment rate held steady at 6.1%, in line with expectations, the true story is almost certainly worse. If the unemployment measure had included discouraged workers, the rate rose from 10.7% to 11%, the highest level in 14½ years.

Looking at Friday’s data, Josh Shapiro, an economist for MFR Inc., wrote: “Whatever the government might or might not do to try to bail out the financial system, a consumer-led recession is upon us, and it promises to be a serious one.”

Source: Dollar moves higher as bailout bill passes – Rise comes despite grisly employment numbers.

This week I try to help you see what might lie ahead around the Curve in the Road. We look at how the rescue plan will function, see what is happening in the economy, and finally muse as to whether Muddle Through is really in our future. It will make for an interesting, if not very upbeat, letter, so strap in. I would like your promise to not shoot the messenger. I am just trying to give you some of my thoughts as to what may lie in our future. And remember, as you read this, we will get through it. There are better days “a’coming.”

The Curve in the Road

When you are out driving on a strange new road, you can’t see around the curve ahead. But you can read the warning signs to get an idea of what might be coming. And while we can’t really know how the developments in the economic world will actually unfold, there are some signs we can point to that might give us a few ideas.

First, let’s look at the “rescue plan” as passed by Congress. As I pointed out last week, this is a bad bill. But it was necessary to pass something, and soon. Earlier this week I sent out a report that reviewed a study of 42 major baking crises. The conclusion: navigating them successfully depended upon quick action.

As everyone should know, the credit markets are almost completely frozen. LIBOR is bid only, no offers. Commercial paper markets are imploding. And what is trading is often at rates that are much higher than they were a few months ago. Corporations are being strangled on high rates. Corporations have little or no access to normal credit markets, and they will face massive problems when it comes time for them to roll over short-term debt.

LIBOR has gone crazy. This is not an orderly market.

Look at the following chart from friend Greg Weldon. For most readers, the commercial paper market is something you don’t think about. But it is the lifeblood of business. We have seen this market drop by almost 30% in a year and by 10% in just the last three weeks! I simply cannot overstate how serious this is. Left unchecked, business activity in the US would soon slow enough to bring thoughts of the Great Depression. It will not be left unchecked.

The credit crisis is not simply a Wall Street issue. It has fast become a Main Street issue. And Main Street is where jobs are created and maintained.

As I have said repeatedly for months, the problem is that financial institutions are having to deleverage. They have massive losses and simply have to raise capital in order to survive. If you can’t raise equity capital (and most can’t), one of the ways you do that is to make fewer loans and to take less risk. You also charge more for the loans you do make.

Larger institutions cannot raise capital on competitive terms. GE is an AAA-rated company. Yet they had to pay Warren Buffett 10% to get $5 billion, plus in-the-money warrants worth at least another 10%. Buffett is likely to double his money on this deal over 4-5 years. A short while ago, GE could get short-term commercial paper for a few percentage points. That difference is going to significantly impact GE’s bottom line. But they had no real choice. They took the money.

As did Goldman Sachs. Yet another Buffett $5 billion preferred-share purchase (with more warrants) at a rate that even Goldman will find it hard to make money on. But they had to raise capital quickly, and they had little choice.

I had lunch with Michael Lewitt and Joe Harch yesterday. They were in town to meet with a client, and we took the opportunity to get together and share notes. They run (among other things) a collateralized loan obligation fund. They buy bank and corporate debt. They now have the opportunity buy well-collateralized loans from rated companies at prices well below par. They related story after story of debt from quality, highly rated companies selling below $.90 on the dollar, and some much lower.

If GE and Goldman are paying 10%, what do you think it costs a firm with “only” a B rating? 15%? More? Junk bond yields have simply gone ballistic. Firms which used the credit market to access capital now are simply shut out. If they are a small public company, they can go to what are known as PIPE hedge funds (Private Investment in Public Equity) and sell equity at usurious rates (which is what Buffett does but on a larger scale). But a small or medium-sized private company? It is a hard time to go looking for money.

Left alone for the markets to work out, the economy of the US and the world would be in a depression within two quarters and would need years to recover. Think Japan.

The Fed, apparently trying to project an appearance of calm and stability as financial markets are ripped apart, left its benchmark fed funds rate unchanged at 2.0%.

“At the end of the day the Fed has refused to bow to pressure to save the system above and beyond what it’s already done,” said Andrew Wilkinson, of Interactive Brokers.

“The winner today may well be the greenback whose multi-year downtrend appears to have run its course. The fact that the currency went into the meeting rallying hard against all units except the yen points to the fact that investors have invested in the policies at both the US treasury as well as at the Fed,” Wilkinson added.

The dollar received its initial boost from a Labor Department report showing that consumer prices dipped 0.1% in August, the first decline in nearly two years. Core CPI, excluding food and energy, rose 0.2%, however. Both numbers were right in line with economists’ expectations.

Many market watchers were expecting a quarter-point rate cut yesterday and, not getting it, still feel it may be in the cards next time. But there is apparently a significant difference of opinion in the FOMC, with a vocal minority warning that inflation remains the most serious threat to the economy, while the others say the focus should remain on the weak economy.

But, “Growing economic slack and sagging commodity prices suggest inflation will drop quickly in the months ahead,” said Sal Guatieri, an economist for BMO Capital.

Source:  Dollar shoots higher -  Fed leaves interest rates alone.

• Retailers reported a 4.3% increase in sales in June gain as rebate checks again bolstered consumer spending. Wal-Mart Stores Inc (WMT), BJ’s Wholesale Club Inc. (BJ) and Costco Wholesale Corp. (COST) were also among the best performers.

• Toyota Motor Corp. (ADR: TM) will start producing the hybrid Prius in the United States for the first time as the Japanese automaker adjusts its manufacturing operations to meet demand for smaller, more fuel-efficient vehicles, the Associated Press reported. The company said Thursday it will start producing the Prius in late 2010 at a plant it is building in Blue Springs, Miss.

• Appliance maker Whirlpool Corp. (WHR) said yesterday (Thursday) that it will close two plants in an effort to streamline manufacturing, the Associated Press reported. Approximately 1,250 jobs will be lost as a result of the closings.

• Brazilian president Luiz Inacio Lula da Silva visited Vietnam yesterday (Thursday) to enhance trade relations between the two nations. “Our bilateral trade remains too small compared with our capability,” Silva said through a translator at a joint news conference with his Vietnamese counterpart, Nguyen Minh Triet.

• General Electric Co. (GE) announced yesterday (Thursday) that it would spin off its GE Consumer & Industrial Group in an effort to bolster a sagging stock price, Bloomberg News reported. Two months prior, GE announced it was selling its well-known appliance division.

• Wachovia Corp. (WB) appointed Robert K. Steel as the new chief executive officer for the Charlotte-based commercial bank. He replaces Kenneth Thompson. Dealing with problem assets still on the bank’s balance sheet is “mission No. 1,” Steel said, DowJones reported.

• The International Association of Machinists and Aerospace Workers (IAM) wants Secretary of Defense Robert M. Gates to ensure that the reopened $35 billion tanker contract bidding for the U.S. Air Force is fair and even this time around, MarketWatch reported. “We are calling for aggressive oversight of the bidding process to make sure [The Boeing Co.’s (BA)] tanker is evaluated on a fair, level playing field,” said IAM General Vice President Rich Michalski. “We will not accept, nor should American taxpayers accept a process or an outcome that is only slightly less rigged than the initial round of bidding.”

• Crude oil for August delivery closed at $141.60 yesterday (Thursday) on the New York Mercantile Exchange after a jump of $5.60 a barrel, which recouped some of the previous days’ losses. “This market, losing $9 in two days, has really been oversold,” Zachary Oxman, senior trader at futures brokerage Wisdom Financial, told MarketWatch. “Geopolitical pressures mixed with the oversold condition are” driving up oil prices.

Source: Global Investing Roundups Friday, July 11th, 2008

Instead the focus was on jobs. Perhaps foreshadowing today’s June payrolls report from the Bureau of Labor Statistics, the ADP employment index indicated that private-sector firms in the U.S. lost 79,000 jobs last month.

That’s the biggest drop in nearly six years and it doesn’t bode well for an interest rate hike from the Fed anytime soon. Combine that with an anticipated rate hike from the ECB today, and you have a predictable scurrying of dollar bulls for cover.

Boris Schlossberg, of DailyFX.com, fears for the worst today. “Because the ADP index has been consistently more positive than actual figures, the fact that today’s numbers were so bad really shocked the market,” he said.

Meanwhile ECB President Jean-Claude Trichet left himself little wiggle room by saying that, “We central banks have a big responsibility … If we’re not decisive, there’s a risk of inflation exploding. If we act in a decisive way, we can master the situation.”

Source: Dollar Slumps as ADP Report Shocks Market, Biggest Jobs Loss in Six Years